Rural telecommunications plans finalised

Tuesday, March 16, 2010

The government has finalised its plans for rural telecommunications with Cabinet yesterday signing off on proposals for the roll out of high speed broadband in rural areas and the reform of the Telecommunications Service Obligations (TSO).

Communications and Information Technology Minister Steven Joyce says the plans will lead to a major step-change in rural broadband.

"As a result of this plan we are confirming today, 97% of households will have access to broadband services of at least 5Mbps; with the remainder reaching at least 1Mbps. For many remote and not-so-remote rural areas this will be light years ahead of where they are today."

A big part of the plan will be connecting fibre directly to rural schools.

"Schools are one of the most concentrated areas of broadband demand," says Mr Joyce.

"The government's rural broadband initiative will help deliver fibre connections to 97% of schools across the country and 99.7% of students. The remaining most remote schools will achieve speeds of at least 10Mbps.

"These speeds will ensure every student has access to fast internet that will help prepare them for living and working in the 21st century world."

Mr Joyce says that the only significant change to the rural broadband initiative was to up-weight the importance of the community connection objectives, relative to the schools part of the initiative.

"Some submitters were concerned that too much emphasis was being placed on school connectivity relative to the rest of the community. We have changed that in the final plan to be clear that while the schools will be the original catalyst to get fibre to the community; achieving at least 5Mbps across the communities is the primary aim of the exercise."

The rural broadband initiative will be developed separately but alongside the government's ultra-fast broadband initiative in urban areas.

"The two different approaches reflect the different population densities and therefore the different economics of providing telecommunications in urban and rural areas," says Mr Joyce.

"Taken together, the two initiatives will deliver to New Zealanders modern telecommunications that will be the equal or better than anywhere in the world."

The rural broadband initiative is expected to cost around $300million, and it is being funded by a $48 million direct government grant, plus $252 million from a new Telecommunications Development Levy being set up as part of the accompanying TSO reforms, which were also confirmed by cabinet yesterday.

All the original TSO proposals have been agreed, including changes to the methodology for calculating compensation for Telecom's delivery of local service.

"I want to stress that changes to the TSO levy would not affect the TSO obligation, which includes free local calls. The idea is not even on the table. Likewise, there are no plans to further loosen the rules around foreign ownership of Telecom," says Mr Joyce.

The TSO reforms will introduce a Telecommunications Development Levy, which is expected to raise over the next six years:

* $48 million for payments for delivery of TSO services and upgrades to the emergency calling services system.

* $252 million for the Rural Broadband Initiative.

"The overall cost to the industry of this new levy is expected to be offset by the reduction in Local Service TSO charges resulting from the TSO reforms," says Mr Joyce.

The government will undertake a two-phase Rural Broadband Initiative tender process. It expects to call for Expression of Interest during April and anticipates commencing allocating funding to successful bidders before the end of the year.